Savers may be wondering if they could get a better rate as the base interest rate has just dropped
Savers have been urged to take up a good savings habit to reach their financial goals more quickly. Chris Henderson, Tesco Bank’s savings and payments director, has offered some tips for savers eager to bolster their funds.
He suggests setting up a regular transfer into a savings account, saying: “This helps earmark money for savings so you don’t spend it elsewhere. Whenever you spend less than you think, consider putting the extra money straight into your savings pot, as that’ll help you reach your target faster.”
The Bank of England decided last week to reduce the base rate from 4.75% to 4.5%. Savers may be keen to lock in a good rate before any future drops.
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For those thinking of switching, Mr Henderson said: “Whether you’re after an easy access savings account, an ISA, or a fixed rate saver, there are plenty of options available to ensure you can squeeze even more out of your budget. No matter what type of savings account is right for you, it’s important to spend time shopping around to ensure you get a competitive rate.”
The savings expert pointed to the advantages of a fixed rate account, saving these would suit a person with a long-term savings goal, as long as you don’t mind your funds being locked away for the term of the account.
Mr Henderson explained: “It’s important to remember that a fixed rate means you won’t see any rises or falls in your returns if the Bank of England makes changes to its base rate. However, a fixed rate can give you peace of mind from a consistent return on your savings.”
He also suggested deciding how much you want to save as this can motivate you to reach your goal faster. Having done this, you can then calculate how many months you’ll need to save up for to achieve your target.
Mr Henderson advised: “This is important if you need to save for something by a certain time, like a wedding or a house deposit. Once you’ve got into a routine, you’ll feel more in control of your savings.”
NS&I recently announced it will be reducing the prize fund rate for Premium Bonds again, which will fall from 4% to 3.8% from the April draw. Some experts predict more rates cuts could be on the way for Premium Bonds.
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Darren Mercieca, finance expert at Kiwi Bets, commented: “There’s certainly a possibility that the prize fund rate could be adjusted again, especially if economic conditions shift. In the past, the rate has fluctuated based on market conditions, so it wouldn’t be surprising if further cuts happen, but no one can say for sure.”
He speculated that the rate could drop to as low as 3.5%. Mr Mercieca encouraged people with Premium Bonds to explore other savings options.
He advised: “A high-interest savings account or a fixed-rate bond, which locks in a guaranteed return, may be better options for anyone thinking about cashing in their Premium Bonds. Peer-to-peer lending platforms and stocks and shares ISAs may provide greater profits if they’re seeking something a little more active, but the risk is higher.”